Paying Online: A How-To Guide

Buying goods online has its benefits - avoiding a visit to the mall being at the top of the list. But is it safe? Is it more expensive than shopping in person? And what options are there for paying? Now, there are more ways than ever before to shop and pay for merchandise on the internet. We have the skinny on how you can make the most of your online shopping experience.

If you're buying from an individual on a website like craigslist (rather than an online store), then you won't necessarily need a credit card. Many online banking services allow users to send money straight from their bank accounts to the retailer, as long as they have an e-mail address and they also use online banking. Make sure you check to find out what your bank's policies are - many charge a fee, which can add up.

Other shopping websites, like eBay, require users to register for an intermediary service, like PayPal, in order to pay for goods. Once you've registered, you can choose to send funds directly from your bank account, from a separate PayPal account or by credit card. (What if you used your credit card as a bank account? Believe it or not, this strange strategy could actually work. Check out Forget Your Bank Account - Use Your Credit Card.)

How to Use it

At the time this story was written, there were 222,535,395 PayPal accounts open worldwide, making it one of the more popular third-party services when it comes to financial transactions on the web. Rather than filling out your address, credit card number and billing information every time you pay for something, PayPal retains this information, and all you have to do is remember a user name and a password when you're checking out.

If you're planning to pay by credit card, you can start using it instantly. If you'd prefer to link your bank account to your PayPal account, it will take a few days for them to verify your account information from your bank. But once you do, you can move money between your personal bank account and your PayPal account with a click of a button.

Who Uses It?

As well as eBay sellers and other kinds of independent online retailers, many types of freelancers and independent contractors may ask you to pay for goods or services via PayPal or a similar program. Users can easily invoice and keep track of which clients have paid and avoid cashing checks or setting up a credit card kiosk themselves. They can also accept payment from any country that offers PayPal, and the service will do currency conversions - at a fee, of course. (Whether you need a ghost in a jar or celebrity-owned socks, eBay can hook you up. Don't miss Odd eBay Sales.)

PayPal has recently partnered with larger retail outlets to make shopping more convenient as well. Again, instead of filling out all of your information on the participating store's website, you just punch in your email address and PayPal password, and the transaction is complete.

Not Just Paypal

But PayPal isn't the only way to pay online. London-based company MoneyBookers is a similar service with approximately 10.8 million account holders worldwide. Users can also transfer funds between countries, and the program will also convert currencies at service charge. But with a few more tests that authenticate a shopper's identity, MoneyBookers clients have higher limits, and can make transactions up to 50,000 euro.

Google Checkout is another similar third-party payment service that has partnered with some retailers in order to make the shopping process quick and convenient. When using the Google (Nasdaq:GOOG) search engine, some websites may have a small picture of a shopping cart beside them. Those identify which websites are participating Google Checkout retailers, and is another method of speeding up online shopping transactions.

Book and DVD outlet Amazon (Nasdaq:AMZN) also offers Amazon Payments, where the same credit card information you used to buy goods on that site can also be used to buy goods on partner online stores like Jockey and Patagonia.

Shopping on the Phone?

Yes, of course you can send money on your smartphone. Just like a computer, PayPal and other similar services are making it possible to make secure payments remotely. Just download the App for your iPhone, Blackberry and Android, and use it just as you would if you were sitting at your computer. (From reminders to pay your bills to portfolio tracking, find out which apps can help you stay on top of your finances in Managing Your Money: There's An App For That.)

The Bottom Line

Often the method you pay for something online isn't up to you - it's up to the retailer. So before you fork any digital dough over, make sure you review the security features that the business has for online payments, or find out what other buyers have experienced in the past on websites like Epinions.com. You should always look for some kind of a reputable stamp of approval from an online security company, and always look out for hidden fees from third-party services like PayPal.

Review what every type of transaction will cost so you don't find yourself paying more than you thought. And finally, if you're having an item shipped to you, make sure the shipping price is reasonable - eBay sellers in particular have been known to over-charge for shipping.